Price is the money charged for a product or service.
It is the value customers give in exchange for the benefits of using the product or service.
Pricing is a key part of marketing and affects a company’s revenue and profits.
It is the most flexible element of the marketing mix.
Major Considerations in Setting the Price
Customer perceptions of value set the highest price (ceiling).
Product costs set the lowest price (floor).
Companies decide the final price by considering:
Competitor’s pricing strategies
Their own marketing strategy
Market conditions and demand
Types of Pricing
1. Customer Value-Based Pricing
Price is based on how much value customers see in the product, not just on costs.
Two types:
Good-value pricing: Offering the right mix of quality and price (e.g., low-cost IKEA products, Dmart).
Value-added pricing: Adding extra features or services to justify higher prices (e.g., premium IKEA products, luxury cars, jewelry, high-end electronics).
2. Cost-Based Pricing
Focuses on keeping production costs low.
Includes both fixed costs (do not change) and variable costs (change with production).
Types:
Cost-plus pricing: Adding a standard profit margin to the product’s cost.
Break-even pricing: Setting a price to cover costs or to achieve a target profit.
3. Competition-Based Pricing
Price is set based on what competitors charge.
The goal is to price according to the relative value of competitors' offerings.
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